Index Ventures: Reasons to be optomistic for the future in the LifeSciences arena




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Video title: Index Ventures: Reasons to be optomistic for the future in the LifeSciences arena
Released on: June 15, 2012. © PharmaTelevision Ltd
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In this episode of PharmaTelevision News Review, filmed at BioTrinity 2012, Paul Larsmon talks to Kevin Johnson, Partner, Index Ventures
Focus on life sciences and partnership with GSK and J&J in fund
Paul Larsmon :
Hello and welcome to PharmaTelevision News Review. On this program I have Kevin Johnson, from Index Ventures. Kevin, tell us a little bit about the company.
Kevin Johnson:
So we are a venture capital firm, we've been doing life science investing since about 1997 although the firm is actually a bit older than that, because we started at in tech, since then we've raised five proper venture capital funds and they've been, we had a pilot fund to start up with when you say proper then we've most recently the all the previous ones have been mixed tech which is in like consumer, internet and social networking and life sciences and this is the first one intently IL6 is the first one that we've got that is purely devoted to life science.
Paul Larsmon :
Why have you done that?
Kevin Johnson:
It's really a consequence of having a GSK and J&J as limited partners in the fund, so that the history behind that is that Moncef Slaoui from GSK he has seen a lot of our companies so from previous funds seen a lot of our companies interested in how we arrived there when we arrived in his office and wanted to do something, something more, but because we've got pharma companies in the fund they don't want to invest or they can't invest in tech they need to invest in life sciences, so we have to split out splitted out and have a life science only fund.
Paul Larsmon :
So this bringing the likes of GSK and Johnson on board into a VC fund that's pretty unique isn't it?
Kevin Johnson:
Having two of them there is unusual, but actually we were only going to do this if we could have two of them in there, because we don't want to become an offshoot of GSK's venture arm and neither we want to become an offshoot of J&J's venture arm they've already got venture arms so it's really have to be something different and having the two there effectively counter balances any bias from one or the other, but also it basically it says it makes a statement that we are actually a free venture firm we are not actually captive to one or other pharma partner.
Paul Larsmon :
But aren't those partners effectively also rivals?
Kevin Johnson:
Yes they are, yes they are and they are happy to work together, I think there is a whole wave of collaborative spirit that's running through the industry at the moment where as basically everybody understands that we're all in an ecosystem and we all have to do our bit in order to keep it going.
Paul Larsmon :
So explain to me the relation between you and the two pharma companies.
Kevin Johnson:
Okay, so there basically they are there partly because we want them there, I mean we didn't need to go to pharma for their money we wanted them there because of their expertise, there is many of the companies that we are growing now ultimately will end up partnering with pharma companies, so in order to better understand what pharma companies want, the structure, how we develop these assets then we basically need to have them inside the house to advice us on how best to develop these molecules. So it's really to try and help us to be better reformed about what we do and the way we do it, so that's the angle there.
Therapeutic focus areas and investment strategy
Paul Larsmon :
Are there any particular areas of disease you gonna be focused on?
Kevin Johnson:
No, so ultimately I think venture capital is a completely opportunistic business and we not going to say we're only gonna focus in these areas, because eventually we don't know that the best things are gonna come in those therapeutic areas and actually from their perspective they don't you know they have their own therapeutic areas in an 80% overlap, but the fact is that that's where they are now in five-years time they could be in something else, so they can change directions strategically very, very quickly and really we have to focus on what we do best which is any therapeutic area but a really interesting and outstanding opportunity.
Paul Larsmon :
And how will you decide on that?
Kevin Johnson:
That's the same way we always do, so they are scientific advisors they are not they have no say in our investment decision, so our investment decisions are made within Index they advice us on the science and they give us access to their institutional memory so that we can make it we can come to a better view on the companies that we are looking at and then how best the ones we're actually developing, so but that's the role and of course their financial LP's as well.
Index Ventures's asset centric business model
Paul Larsmon :
Now Index Ventures talks about going its asset centric model can you explain what do you mean by that?
Kevin Johnson:
It's basically a company with one product, so this is rather than having a portfolio to try and manage a risk there we ask our entrepreneurs to look at to just pick one product so the stringency with which they'll choose that one product which is their upside is higher than it would be if they have a portfolio. So you are unlikely if you have a portfolio of five things you can make five choices, you are unlikely to be a stringent about the fifth as you are about the first, so what we're enforcing is they've really got to focus on one thing so the opportunity cost for them is very, very high that they've chosen the right thing and that's seem to be born out so we've been doing this for seven-years and that's been born out in the track record of the companies that we've done this way so that they are above the industry average in terms of success criteria and so we think that's because we remove the portfolio element of any decision making we are pretty sure it is, so that's the big that's the big differentiator it's a small virtual company it's usually five or six people in the company most of the in fact virtually everything is outsourced and then they're managing the program from beginning to end as long it survives through the key milestones.
Paul Larsmon :
Is there a danger that if you concentrate on the assay you don't necessarily concentrate on the people who are working on it?
Kevin Johnson:
We concentrate very much on the people who are working on it because that's really that if you look at what Index's angle is it's our network of entrepreneurs we call them IDD's (Index Drug Discoverers) but it's this is our leverage because basically we have 15, 16 of these people at any one time who are in our close network that people we work with before and that people we trust and we trust their judgment, so we'll back their judgment. So if they see something that really excites them then by definition we should be interested in this and in most cases we have been if they've picked out something it's like actually I am prepared to use my bullet on that particular molecule then work for everything behind them and we will support them all the way through that and that the idea is that if they, if that program isn't developing as they expect or isn't delivering on the promise then we would basically want them to kill it, because it's much better that they we get false negatives and false positives much better they kill it and then we will find another found another assay that they can work on, but we are really are focused on the entrepreneur and making sure they're on the opportunity they really believe in and because that's way they're going to make their upside from.
Kevin Johnson's perspective: Current venture capital environment and future prospects
Paul Larsmon :
Okay from the specific to the general, I mean how have you found the world of VC in the last two difficult years?
Kevin Johnson:
I found it it's an interesting world so there is something new every day I have to develop IDD so that I can move very quickly from a small molecule in Alzheimer's through to a viral you know oncolytic viruses, right so you go from one extreme to the other and basically you've got to be able to switch gear very quickly, so that's been probably the biggest challenge and the rest of it is really just a multiplicity of similar things that I've seen before when I've been in companies myself, I mean this you get the same things cropping up time and time again this really not that different, so it's really is just a you tend to get a lot of things running along in parallel so it's a fuller existence then it has been before but an interesting one, I am enjoying it.
Paul Larsmon :
Good. I mean we are in a double-dip recession, have you reasons to be optimistic about the future?
Kevin Johnson:
Yes, I think so. I mean that for multiple reasons not just one thing I mean the when we talk to our LP's when we were raising this fund the economic circumstances really didn't enter into any conversation which I was surprised about, I thought they've sited at some point and in fact only one LP even mentioned it and because the fact of the matter is they can't just run scared every time that there is a dip in the economy because they have a long time view their pension funds, their insurance companies. So in terms of being able to raise finance that's never been the issue, the issue has always been a local one of how can I make a return in the life science business, because a return to life science investment haven't been as good as the industry, the industry can achieve and said for example if you look at tech they tend to be better in tech then they have been historically in life sciences. So it's always been a local problem from that perspective but then you look at what people need to do to get out of a recession and I think most economy seem to believe that is the small medium enterprises that are going to drive the, drive the way out of the another recession and can give you the growth and this is precisely the area we're in and so if you look at you know it's not just our fund that was raised recently, you've got the Wellcome Trust, you've got the CLT you know they're all there ready to fund early stage research and the small medium enterprises which is basically where we are, so yes and the other thing I see is demand from pharma, because pharma seems to be more and more if you look at the megatrend pharma is more and more looking outside their own walls for all the innovation, so you know it's this is a as good a time as I ever seen.
Paul Larsmon :
Kevin Johnson from Index Ventures, thank you very much indeed.
Kevin Johnson:
My pleasure, thank you.
Paul Larsmon
Paul Larsmon has worked as a broadcast television journalist for 25 years, covering general news, business and politics. He has been both presenter and producer in several news broadcasters, including the major British television news company ITN. He joined PharmaTelevision as Executive Producer earlier this year and has been responsible for getting PTV News launched.
Kevin Johnson
Partner
At the time of recording this PTV interview Kevin Johnson serves as Partner at Index Ventures working out of the London office. Prior to that he was CEO of PanGenetics, an antibody development company based in the Netherlands, and one of the Index Ventures portfolio. Kevin was one of the team at Cambridge Antibody Technology (CAT), heading up research from 1994 onwards. In 1997 he was appointed to the Board, where he held the posts of Research Director and Chief Technology Officer. Kevin led both the development of CAT's platform technologies, and also their application to the discovery of a number of human antibodies currently in clinical development. Two of these are now marketed, Humira (Abbott Pharmaceutical) and Benlysta (HGS, GSK). He was also part of the management team that floated CAT on the London Stock Exchange (main market). Kevin graduated in Molecular Biology from Edinburgh University and has a PhD in Pathology from Cambridge University.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
Index Ventures
Index Ventures is a leading venture capital firm specializing in investments in information technology and life sciences companies. The firm invests in seed, early and growth stage start-ups across US and Europe. Since its inception in 1996, Index Ventures has backed visionary entrepreneurs who have taken on incumbents and built seminal companies in a number of growth sectors including: open source software companies such as MySQL, Trolltech, Zend and Pentaho; broadband and VOIP companies such as Virata, Skype, FON and Rebtel; Internet service companies such as Dropbox, Path, Betfair, Oanda, Last.fm, SpotRunner, Lovefilm, Stardoll and Netvibes; and life science companies such as Genmab, ParAllele Biosciences, BioXell, 7TM Pharma, Addex Pharmaceutical and PanGenetics.